Owning a car is a convenient solution to the transportation problem. Buses and public transit systems are incredibly helpful, but nothing beats the convenience of owning a car. Still, maintaining a car, like anything you own, takes some responsibility, and it is your job as an owner to make sure your vehicle is insured in case of an accident.

It is important to define what auto insurance is first before you throw your hard-earned money at some company you saw on TV. Auto insurance basically prevents you from suffering a financial loss if you ever get in an accident. Buying insurance involves making a deal with an insurance company: while you pay a monthly premium, the company will in exchange cover the cost of certain damages that occur during an accident. Most states require at least some form of insurance for all drivers, but there are many different types of insurance coverages you can maintain depending on your insurance company, your state requirements, and your situation. Some of these you can purchase individually or under a full coverage package (which is really a collection of several types of coverages). Three of the most common coverages include:

• Liability – Most states require drivers to have liability coverage. This means that in an event of an accident, your company will pay for any bodily or property damage incurred on a third party.

• Collision – If you’re trying to finance a vehicle, your lender will most likely require you to own this until you pay off a car. Collision coverage basically covers repair payments or a set amount of money for a vehicle that’s been completely demolished in an accident.

• Comprehensive – This coverage basically handles any accidents that aren’t related to a collision, such as theft, vandalism, animal-related accidents, a spontaneous tornado, etc.

So, when you buy your first or next car, make sure your auto insurance company offers a form of at least those three coverages, and make sure you learn more about the various ones they offer. Picking a company can be a difficult decision, so make sure you compare rates, policies, and even customer reviews to decide which insurance plan is the best for you.